The Obama Administration says they want to stop giving away $4 billion of taxpayer money each year to oil companies. The White House sent out a press statement today (Monday, March 26, 2012) reiterating their stance to stop what they call "subsidies’ to oil companies.

Ending Fossil Fuel SubsidiesWhite House statement on March 23, 2012: "Earlier this month, President Obama called on Congress to repeal the $4 billion annual subsidies we give to oil companies, and they are scheduled to vote on doing so today. Investing in an all-of-the-above energy strategy requires the putting the right incentives in place. Instead of subsidizing the fossil fuels of the last century by giving away $4 billion of taxpayer money each year to oil companies that are more profitable than ever, we should be investing in a clean energy future -- especially when gas prices are high and drivers, whose budgets are already stretched thin, are feeling the pain at the pump."

Critics argue there is no subsidy here and the federal government is not giving oil companies taxpayer money. What is actually happening is companies are taking tax credits and deductions, allowed to all manufacturers in the United States. Oil companies are also allowed to write off the cost of drilling as a tax credit. Like other industries, oil companies are allowed to write down a portion of the cost of its capital equipment. Lastly, companies that do business in foreign countries are allowed a foreign tax credit to compensate for taxes they pay to other countries, so they aren’t effectively paying a U.S. tax on a foreign tax. These tax credits are allowed for all manufacturing businesses, not just oil companies. Those arguing against the White House’s plan say eliminating what the White House is calling a "subsidy’ really means unfairly singling out the oil and gas industry to not be allowed to take the tax credits that all other businesses in the manufacturing industry are allowed to take through our current tax code.

The American Petroleum Institute website says:"The U.S. oil and natural gas industry does not receive "subsidized" payments from the government to produce oil and gas. However, there are many provisions in the tax code that allow companies to recover their costs. The oil and gas industry are eligible for these deductions, which are similar to, if not the same as, deductions available to many other industries.

U.S. oil and natural gas companies pay considerably more of its profits in taxes than the average manufacturing company. Tax deductions should in no way be confused with subsidies. A fundamental pillar of the U.S. income tax system is that businesses are taxed only on net income. This means that there needs to be some practical and fair method for businesses to recover costs. The policies underlying cost recovery provisions in the tax code legitimately utilized by the oil and natural gas industry are no different than those for any other industry, and are necessary to insure that our industry is treated no differently than any other."

While politicians (Democrat and Republican) are pointing out the high cost of fuel impacting the consumer’s pocketbook, they rarely mention the state and federal taxes the consumer must pay on each gallon of fuel, adding to the cost.

Gas taxes adds to consumer’s wallet crunch at the pumpThe federal government charges a federal excise tax on fuel intended for transportation. As of February, 2011, that tax was 18.4 cents per gallon on gasoline and 24.4 cents per gallon for diesel. States also charge excise taxes on fuel, some equaling the amount of the federal gas tax. There are also a few states and municipalities that charge sales tax on top of the excise taxes and the retail price. States that have a tax on their fuel, also impose a tax on commercial drivers that travel through their state, even if the fuel is not purchased in that state. Fuels used to power agricultural vehicles, and/or home heating oil which is similar to diesel, are taxed at a different rate, usually lower.